Keeping U.S. export reform on task in 2013

Wednesday, December 12, 2012

A senior Commerce Department official helping to oversee the overhaul of the country’s antiquated export control regulations said the Obama administration is committed to following through on concluding these reforms in its second term.
“Given last month’s election results, we have time to finish the largest part of the reform effort—the transfer to the Commerce Control List of defense articles that do not warrant control on the U.S. Munitions List—and also to make other improvements to our system,” Eric L. Hirschhorn, Commerce undersecretary for industry and security, told the Practicing Law Institute in Washington in a Dec. 10 speech. “Having a second term gives us the chance to consider and address those tasks as well.”
The reform effort effectively got underway in April 2010.

Hirschhorn

“Our ultimate vision for a new export control system remains one with a single licensing agency administering a single list, operating on a single information technology (IT) platform, and enforced by a single export enforcement coordination agency. This objective, however, will require legislation to complete,” Hirschhorn said.
So far, the Commerce, State, and Defense departments have agreed on almost all the proposed revisions of control list categories. The Bureau of Industry and Security and State Department have published 24 proposed rules covering categories of the International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR), including the proposed “specially designed” and transition rules. The proposed rules cover such categories as military aircraft, engines, explosives, naval vessels, tanks and military vehicles, protective personnel equipment, auxiliary military equipment, and submersibles.
Congress and the administration have also started the process of de-controlling aspects of commercial satellite exports, placing them back in the hands of Commerce’s jurisdiction.
Hirschhorn said the goal is to “revise the U.S. Munitions List to clearly and positively identify those items that provide the United States with a critical military advantage or that otherwise warrant case-by-case licensing to essentially all destinations,” and then “control all the remaining items specially designed for military applications on the Commerce Control List, which allows for conditioned licensed exceptions for exports to close allies and strict prohibitions and controls on exports—and re-exports—to other countries.”
While the process has been ongoing, Hirschhorn said, it’s difficult nonetheless.
“Led by the Defense Department, hundreds of experts with varied backgrounds in multiple bureaus and the military services have reviewed thousands of controls that are decades old involving hundreds of thousands of articles involving just about every area of technology,” he said. “Each change, correction, or second thought then needed to be recirculated for additional reviews.”
In addition to the publication of proposed rules and efforts on satellites in Congress, Commerce has taken a number of steps to improve its export control system during the first Obama term. These includes:

Addressing key operational issues, such moving toward the USXports I.T. platform, which the department expects to have in “initial operation capability” for all export control agencies soon.

Establishing and training the Munitions Control Division within BIS in anticipation of the movement of items that no longer warrant ITAR control.

“We’ve also enhanced enforcement capabilities within BIS and across the U.S. government. This is partly the result of the establishment of the Information Triage Unit (ITU) and Export Enforcement Coordination Center (E2C2), which have enhanced our intelligence abilities and interagency collaboration,” Hirschhorn said.
He added the agency has “obtained permanent law enforcement authority for our export enforcement agents and have focused our enforcement investigations on not only companies that violate our regulations, but also individuals. No longer will an individual be able to intentionally violate the EAR and leave the company’s shareholders to foot the bill, while he banks his commission.
“It is worth noting that, in our enforcement, we are trying to make a distinction between ‘oops’ and ‘the heck with you’—meaning that we are focusing on the truly bad actors, not those who had a decent compliance program, made a mistake, and are working with us to remedy the situation,” he said.
Starting next year, Hirschhorn said BIS will initiate an educational outreach effort to help companies understand and deal with the changes to the export control system. This will include more specialty training programs and remote training opportunities. “The proposed changes will benefit national security, foreign policy and industrial security, but the transition will be difficult in the short term and we want to help companies successfully respond to the new environment,” he said.
Other topics that will get attention by BIS in 2013 include encryption controls and deemed export requirements.
“In the end, our plan will accomplish the national security objectives, in part, by making it easier for U.S. companies, especially small and medium-sized businesses, to engage in secure trade, particularly with NATO countries and other close allies,” Hirschhorn said. “This has the tangible benefit of bolstering the security of supply from small companies that are second and third tier suppliers to the U.S. and our allies. At the same time, we are ensuring that the nation’s export control system prevents items from ending up where they should not.”